There are many ways for parents to save for their child’s college education beyond a 529 savings plan. No matter the method or methods you choose, the best approach to college savings is starting early. Qualified tuition programs, a Roth IRA, Coverdell ESA, mutual funds, and U.S. savings bonds are some of the other options.

529 plans are appealing because they are a tax-advantaged way to save for college and with benefits like the ability to change the beneficiary, pay for K-12 tuition in addition to college or universities, and no income restriction. The only downside is that noneducation related expenses will be taxed. Beginning in 2024, SECURE 2.0 Act will allow the beneficiaries of 529 plans to roll up to $35,000 into their Roth IRA over time based on annual Roth contribution limits. The only catch is the 529 plan must be open for more than 15 years. 

Residents of North Carolina may opt for the NC 529 which offers the same benefits as any 529 plan but also the option to pay for trade school expenses, as long as the student is on the Federal Student Aid list, and pay for special needs equipment. In South Carolina, the Future Scholar 529 plan has very low fees and a higher contribution limit than most 529 plans. Click HERE to find information about 529 plans in other states. 

Another type of 529 plan is the prepaid tuition plan which is state sponsored and allows parents and grandparents to prepay tuition at today’s rates at participating colleges and universities. There are residency requirements and currently only 9 states have prepaid tuition plans that are open to new enrollment. Click HERE to see the list of states welcoming new plan members. 

Coverdell ESA, Education Savings Account, is a trust or custodial account that can be opened at almost any bank or brokerage firm. Unlike a 529 plan, a Coverdell ESA limits the total contribution to $2000 annually per beneficiary. The funds can be used for K-12 tuition and other qualified educational expenses in addition to college or university, but any remaining funds in the account when the beneficiary turns 30 must be distributed within 30 days, unless the beneficiary has special needs. 

Parents put a lot of pressure on themselves to make the right decision for their child and their child’s future, and Alloy Wealth Management is here to help take the stress out of college savings. Call 800-689-3935 to speak with one of our financial professionals and get answers to your questions about the various college savings options.